Temporary VAT reduction by 3% until 31.12.2020

2020-06-09 13:04:20

Interesting, this very specific restriction of the clause with "higher VAT expenses compared to suppliers" is not included in my case. I'm curious how our home builder will handle it if we do the building acceptance after July 1st.

The main contractor/subcontractor recovers the supplier's VAT from the tax office. So the VAT is only a pass-through item. In this respect, in my opinion, no higher expense can arise for the main contractor.

Where it becomes noticeable is with the property developer. The sale to the buyer is VAT-exempt, but for that reason, they are also not allowed to reclaim input VAT from their suppliers from the tax office.

2020-06-09 13:13:11

Logically rather 16% with the same gross amount

It was about what believes. But in my opinion, that would also not be tenable.

Sorry quoting just didn’t work.

In my opinion, if the final acceptance is in the period from July, then the VAT rate valid at that time is relevant for it.
I also don’t believe that any strange regulations in the contract can withstand that.
Maybe some clever entrepreneur will try to charge the same gross amount but with only 16% VAT. But in my opinion, that is not legitimate. For an entrepreneur entitled to input tax deduction, this is a pass-through item. They only have to pay 16%.

2020-06-09 13:22:56

It was about what believes. But in my opinion, that would not be tenable either.

In my opinion, if the final acceptance is in the period from July, then the VAT rate applicable at that time is relevant for it. I also don't believe that any strange regulations in the contract would stand against that. Maybe some clever entrepreneur will try to collect the same gross amount but only with 16% VAT. But in my opinion, that is not legitimate. For an entrepreneur entitled to input tax deduction, it is a pass-through item. They only have to remit 16% as well.

2020-06-09 16:27:47

In my opinion, if the final acceptance is within the period starting from July, then the VAT rate valid at that time is relevant.
I also don’t believe that there are any strange provisions in the contract that would contradict this.
Maybe some clever entrepreneurs will try to charge the same gross amount but only with 16% VAT. But in my opinion, that is not legitimate. For an entrepreneur entitled to input tax deduction, this is a pass-through item. They only have to pay 16%.

Since I have to deal with this topic over the next days and weeks, I just looked at the BMF letter from 2006 regarding the VAT increase as of 01.01.2007.

It says there:

Passing on the increase to the service recipient?

If the service is only finally provided in 2007, the supplying entrepreneur must invoice the VAT at 19 percent. This also applies if the parties, when concluding the contract in 2006, still assumed that the service would be provided before January 1, 2007, and thus at a tax rate of 16 percent.

Note: However, this regulation does not entitle the supplying entrepreneur to increase the gross price accordingly. The question of whether the higher tax burden can be passed on is rather a civil law matter, the answer to which depends on the respective contractual and legal situation.

Just as the entrepreneur was not simply entitled to increase the gross price back then, conversely, the service recipient is not automatically entitled to reduce the contract value by 3% now.

2020-06-09 16:43:58

Just as the entrepreneur was not simply entitled to increase the gross price back then, conversely the client is now not automatically entitled to reduce the contract value by 3%.

I'm not a tax expert...

If you read further, there was also a 4-month regulation back then. In other words, contracts concluded more than 4 months before the tax change came into effect could have the tax added.
In my opinion, it was regulated this way because from 01.09.2006 everyone knew that the tax increase was coming. That time period doesn't exist now.
I just can't imagine that entrepreneurs are "allowed" to collect the 3%.

help me out! You are good at this!

2020-06-09 16:49:13

Just as the entrepreneur was not simply entitled back then to increase the gross price, conversely the recipient of the service should not automatically be entitled to reduce the contract value by 3%.

I would doubt that.
For the performing entrepreneur, it does not involve any loss if he calculates the now reduced VAT on the original net contract value (and only that effectively passes through the balance sheet as a receivable). His profit remains the same. However, if he leaves his receivable unchanged and only reduces the liability due to the reduced VAT, that is a profit which should not be contractually covered.
From a tax law perspective, the performing entrepreneur would have to recognize some form of profit in any case (it will be interesting what this item will be called) – from a civil law point of view, I personally believe there will be some lawsuits if the performing companies hold their ground on this.

Edit: Only saw a report today that retail will probably try to handle the whole thing largely through discounts. In other words: the price on the shelf will not be adjusted because that is far too complicated, but in the end a flat discount will be deducted at the checkout. The profit is not supposed to stay with the retailer.

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Temporary VAT reduction by 3% until 31.12.2020

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